By NEIL HARTNELL
Tribune Business Editor
A Bahamian insurance loss adjuster is not entitled to a 50 per cent share of “catastrophe profits” stemming from work done for RoyalStar Assurance in the Cayman Islands post-Hurricane Ivan, the Court of Appeal has ruled.
The Bahamian appellate court found in a November 8, 2012, verdict that Crawford (Bahamas) could not claim a share of those proceeds because its management agreement with a US company did not cover loss adjusting work outside this nation.
The judgment stems from a dispute between the two companies over who is owed what from the now-ended management contract, with a sum in excess of $1 million involved.
The Court of Appeal ruling also described as “somewhat perplexing” the earlier Supreme Court verdict by then-Senior Justice Anita Allen (who is now the Court of Appeal’s president) that found in favour of Crawford (Bahamas).
Justice Allen did not hear the case before the Court of Appeal given that she had presided over the initial trial, with the three-strong appellate panel overturning that verdict in favour of Crawford & Company International.
Setting out the background to the dispute, the Court of Appeal said the June 1, 2002, three-year management agreement signed between Crawford & Company International and Alba Enterprises, the 100 per cent beneficial owner of Crawford (Bahamas), lay at its heart.
While the parties shared the same ‘Crawford’ name, the judgment made clear they were two distinct, separate entities. Crawford & Company International is an “international loss adjuster” headquartered in the US, while Crawford (Bahamas) is a claims loss assessor in this nation.
The Court of Appeal said the management agreement allowed Crawford & Company International to appoint a managing director to run the Bahamian company’s business operations, with the deal also setting out fees and formulas for how the US company was to be compensated for its services.
Crawford (Bahamas) served notice that “it did not wish to renew or extend” the management contract on May 31, 2005, although the arrangement continued on “an informal basis” until August that year.
The judgment noted that Crawford (Bahamas) then refused to pay what the US company demanded as compensation for its services.
“As a consequence, in November 2005, the appellant [Crawford & Company International] sued the respondent [Crawford Bahamas] for the sum of $1.009 million that it alleged was due under the contract,” the Court of Appeal found.
“The respondent, while acknowledging that it owed the appellant $657,755, counterclaimed for damages for failure to manage its business in a proper business like manner, an accounting in respect of claims processed in the Cayman Islands as a result of Hurricane Ivan in 2004, and for the return of documents and papers.”
The key issue before the Court of Appeal was whether the management agreement had “extraterritorial effect”, meaning that Crawford & Company International was required to pay Crawford (Bahamas) for work it had done outside this nation.
This was a central thrust of Crawford (Bahamas) counterclaim - that its business “included work outside the Bahamas”, and thus required the US company to account to it for revenues earned from such work.
Then-Senior Justice Allen had found that Crawford (Bahamas) work “included business emanating in the Bahamas and outside the Bahamas”, finding in the Bahamian company’s favour.
This, though, was challenged by Crawford & Company International’s attorney, Marco Turnquest of Lennox Paton. He argued that a true construction/reading of the management agreement showed it was “confined to that of loss adjusting within the Bahamas”.
And, Mr Turnquest said, Crawford & Company International had been retained directly by RoyalStar Assurance to carry out post-Ivan claims loss adjustments in the Cayman Islands, meaning Crawford (Bahamas) was not entitled to compensation from these activities.
“He argued that it was inconceivable that Crawford International would have agreed to extend the contract to the Cayman Islands or any other country, and agree to share 50 per cent of any catastrophe proceeds,” the judgment said.
Randol Dorsett, the attorney for Crawford (Bahamas), challenged Mr Turnquest’s assertion. He noted that Crawford & Company International had previously managed catastrophes for the Bahamian company, such as Hurricane Michelle in the Cayman Islands in 2001.
He also backed the Supreme Court’s assessment of the chief witnesses, Thomas Dawson for Crawford & Company International, and Donald Gow for Crawford (Bahamas).
“In particular, Mr Dorsett noted that Mr Dawson had admitted on cross-examination that work was done for the defendant outside the Bahamas, the critical issue to be determined,” the judgment said.
Then-Senior Justice Allen had said in her earlier verdict that she was unable to determine what the management agreement meant by the “true business of the company”.
But Justice Conteh, writing the Court of Appeal verdict, said the language used was “clear and plain”. As a result, he found the Supreme Court verdict “somewhat perplexing”, and “difficult to appreciate and follow”.
Putting the agreement’s recitals together with the other provisions, Justice Conteh wrote: “It is therefore manifest that ‘the business of the company’ could be nothing more and nothing less than the business of loss adjusting in the Bahamas.....
“From the plain words of the parties’ agreement this was what they intended. To hold otherwise and give the agreement an extra-territorial effect or operation.... is to put on the parties’ clear words in their agreement a weight that is unsustainable and uncalled for.”
In allowing the appeal, Justice Conteh and his fellow judges left in place the appointment of an independent accountant to determine who owed what under the management agreement.